Money Managed Properly Attains Freedom
If you are like most people you either obtain money from a job or from the growth of your investments. You could also be lucky and receive an inheritance; but this is rare, so don’t count on it. How you manage the money from your earnings and investments will determine if you ever achieve financial independence.
Money From Your Job|The Beginning
This is where we all start; we get a job and make a living but it does not have to end there. You can break out of the paycheck to paycheck cycle.
Your working years are limited so what you do with your earnings will determine if you ever make more money than your paycheck. Break out, by watching your spend habits. If you spend more than you earn, you will have no money leftover to invest and be stuck with just having the money from your paychecks.
Getting To The Next Phase
To guarantee that you get yourself to the next phase, the investment phase, earmark a certain dollar amount to have automatically deposited into your retirement plan every single month from the very first day you start working. If you spend first, and then invest any leftover money you will never make it to the investment phase because these is rarely money leftover.
After your retirement earmark is in place allow yourself to spend whatever you have leftover. You don’t have your credit cards, you don’t have a line of credit extended from the equity in your home…all you allow yourself to spend is what’s leftover after your investments.
Money From Your Investments|The Next Phase
The best advice financial planners give is to start investing at an early age to take advantage of compounding. Investing at an young age gives your investments more time to grow, plus it gives them time to rebound from the ups and downs of the market.
The growth of your investments takes time, so the more time your money is in the market, the larger those investments will grow to. Compounding interest is magical; it is the concept of interest earning interest on interest. Due to the way your money is working for you by compounding if you start at a young enough age, you will have to invest less overall than someone who starts investing at an older age. With compounding, being in the market ten years longer can make a big difference in the growth of your investments.